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Thursday, 12 June 2008

Faisal Bank to expand into region from Malaysia

KUALA LUMPUR: Faisal Private Bank (Switzerland) SA, which is looking to expand in Southeast Asia, has chosen Malaysia as its launch pad into the region’s Islamic private banking market.

Its investment banking head, Giovanni Perin, said the bank, which is 79.6% owned by Bahrain-based Ithmaar Bank, will open a representative office here soon.

“We have been given the nod by the Swiss Federal Banking Commission to open a representative office here and we have just filed the documents with Bank Negara Malaysia for its approval,” Perin told The Edge Financial Daily in an exclusive interview here yesterday.

He said the office, which is expected to open in one-and-a-half months’ time, will be mainly used to service its customers, who are mostly high net worth investors.

The bank might also acquire strategic stakes in local financial institutions as part of its efforts to grow its businesses.

Perin said Faisal’s ideal partner would be one whose forte lies in setting up funds, and has a good network.

“Obviously, we have come a long way for more than just a simple plan,” Perin said, adding that Faisal had genuine interests in using Malaysia as a platform to tap into other markets in the region, including Indonesia, Singapore and China.

Calling the strategy “swimming against the current” in the wake of high inflation and economic uncertainties in Asean countries, Perin said the private bank, nevertheless, was still keen in entering these markets, given that it was interested in long-term growth in the region.

Perin, however, declined to reveal more and said the private bank would like to focus on opening its representative office here first.

He said Faisal preferred Malaysia to Singapore as its investment platform, as it believed Malaysia has a stronger foothold in Islamic financing.

He added that Faisal has close relations with Malaysia, having invested in properties in the country since a decade ago. Its controlling shareholder Ithmaar Bank’s subsidiaries and affiliates include Shamil Bank of Bahrain, and takaful company Solidarity, which has a 25% stake in MAA Takaful Bhd.

In June last year, Faisal partnered Amanah Raya Bhd to acquire a commercial property in Maryland, USA, for US$75 million (RM243.75 million) and leased it to the US government for an annual yield of 8.25%.

Faisal is currently in talks with several corporations, local banking groups and developers to set up Syariah-compliant investment products here, or as a partner to set up funds in Europe, Perin said.

He said unlike commercial banks, Faisal served a niche market that comprised affluent investors with up to US$1 million of reserves to park in the private bank.

“We are also interested to know the strength of our customers’ financial background, as we are renowned for giving quality financial and advisory services to our clients,” he said.

He added that Faisal, which usually invests in private equity and real estate, is inclined to be conservative in its investment strategy, as its clients have invested in the bank to preserve wealth for their future generations.

“We are not here to compete with the big names such as Kuwait Finance House, Al- Rajhi Bank and Dubai Group, but we are special, as Islamic private banking is still at the infancy stage and we expect the sector to be a high-growth one in the future,” Perin said.

He said Islamic private banking is enjoying between 15% and 20% growth globally, compared with the 8% to 10% growth of commercial banks.

Faisal, he noted, has a competitive advantage over other private banks as it has Swiss banking expertise and a first-movers’ advantage in investing in Eastern Europe.

“Most banks only started to venture into Eastern Europe last year, but we have been investing in real estate there for many years now,” he said, adding that Bulgaria, Romania and Poland have become very attractive markets, mainly because of their entry into the European Union recently.

Perin said Faisal also benchmarks its investments against international standards, and has targetted 8% to 10% returns for a five- to 10-year period.

“However, it also depends on the asset class that we invest in, as we have seen our investments in Eastern Europe giving us 20% returns,” he said, adding that Faisal would generally not go for high-risk investments and was not directly exposed to the subprime mortgage crisis in the US.

Perin said despite its conservative investment strategy, Faisal was opportunistic when it came to testing new markets, one of which was the modern art market.

“We want to try different assets, and who knows? The sky’s the limit, as we have the platform to grow,” he said.

Although Faisal may be a small player, its stability is a winning formula for long-term growth, he added.

“We may not be the HSBCs or UBSes of the world, but we can safely say that at least, we are here to stay,” Perin said.